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Reliance Industries Ltd. Versus Commissioner of Central Excise, Mumbai-I

2015 (11) TMI 1048 - CESTAT MUMBAI

Refund of service tax - developer unit in SEZ - claim of refund prior to the exemption notifications no 9/2009-ST issued - first appellant authority denied the refund for the reason that (a) the exemption is available only to service tax paid after the notification has come into force (paragraph 3 of notification 9/2009-ST dated 3 rd March 2009) and (b) that the applicant had not sought refund within six months of payment of tax (condition (f) in paragraph 2 of notification 9/2009-ST dated 3 rd .....

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rst such enabling procedure after the Special Economic Zones Act, 2005 was brought into force on 10 th February 2006.

From the notifications of 2009 issued by Department of Revenue, it is clear that the test of utilization of service for authorized operations is left to the wisdom of the Approval Committee and the satisfaction of the jurisdictional Assistant Commissioner regarding its actual utilization. This is in conformity with the scheme envisaged by the Special Economic Zones Ac .....

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> Provisions of section 26 of Special Economic Zones Act, 2005 are conferred with a primacy that cannot be denied, diluted or denigrated owing to delay in devising a facilitative mechanism that was agreeable to Revenue. Disregard of parliamentary intent to levy a tax or exempt a tax cannot be brooked under any circumstance. A harmonious construction of the exemption notification 4/2004-ST dated 31 st March 2004 that preceded the Special Economic Zones Act, 2005 with that Act must perforce be th .....

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Appeal No. ST/466/10 - Final Order No. A/3504/2015-WZB/STB - Dated:- 13-8-2015 - M. V. Ravindran, Member (J) And C. J. Mathew, Member (T) For the Petitioner : Ms Manya Bhardwaj, Adv For the Respondent : Shri R K Das, Dy. Commr (AR) ORDER Per C J Mathew This appeal lies against order-in-appeal no SB (81)81/211/2010 dated 29 th June 2010 of Commissioner of Central Excise (Appeals), Mumbai Zone - I which rejected the appeal of M/s Reliance Industries Ltd. (known as M/s Reliance Petroleum Ltd. befo .....

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be charged with duties or taxes under section 26 of Special Economics Zone Act, 2005 and, having been charged for the same, they were entitled to refund of ₹ 12,32,233/- borne by them. 2. The impugned order held that taxes are exempt to the extent that they are consumed within a Special Economic Zone but that the said tax had been discharged on services related to Initial Public Offering (IPO) which was billed to the corporate office of the appellant at Mumbai and not to its Zone under imp .....

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abad [2013-TIOL-1091-CESTAT-AHM] and Tata Consultancy Services Ltd v Commissioner of Central Excise & Service Tax, Mumbai [2012-TIOL-1034-CESTAT-MUM]. Learned Authorized Representative reiterated the findings in the impugned order and contended that the exemptions were available only when the nexus with authorized operations within the Special Economic Zone is established. 3.1 As contended by the appellant, they are in the business of setting up and operating a Special Economic Zone; that th .....

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cial Economic Zone. It was further pointed out that the impugned order erred in holding that raising funds in the capital market was not within the scope of authorized operations. It was also contended that it was incorrect on the part of first appellate authority to hold that appellant had not locus standi because the incidence of tax had been borne by the appellant though collected and deposited by M/s NSDL, the service provider. It was also contended that the impugned erred in its finding tha .....

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3.3 Special Economic Zones are established in conformity and in accordance with the scheme embodied in the Special Economic Zones Act, 2005. Exemptions from customs and excise duties and service tax are available to developers/co-developers of the Special Economic Zones as well as to entrepreneurs who set up exporting units within the Zone to extent that goods are procured or services are received for authorized operations, Authorized operations qua the developer/co-developer are those permitted .....

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ms is a member. The services permitted for use in authorized operations of the unit are also approved by the Approval Committee. Such goods and services are entitled to exemption from duties or taxes. 3.4 The comprehensive Special Economic Zones Act provides for exemption of duties and taxes besides according overriding effect when in conflict with other laws and for deeming the Zone to be outside the Customs territory in relation to authorized operations. The relevant provisions of the Special .....

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ntrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India: (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economi .....

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other than this Act. ****** 53. A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. 3.5 While in the exemption to imported or domestically procured goods can be implemented and monitored through the Authorized Officers of the Special Economic Zones in accordance with the procedures laid down in the Special Economic Zone Rules, 2006, services, owing to their int .....

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conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Government of India, Ministry of Finance (Department of Revenue), No. 4/2004-ServiceTax, dated the 31st March, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 31st March, 2004, vide, G.S.R.248(E), dated the 31st March, 2004, except as respects things done or omitted to be done before such supersession, the Central .....

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e said Finance Act: Provided that- (a) the developer or units of Special Economic Zone shall get the list of services specified in clause (105) of section 65 of the said Finance Act as are required in relation to the authorised operations in the Special Economic Zone, approved from the Approval Committee (hereinafter referred to as the specified services); (b) the developer or units of Special Economic Zone claiming the exemption actually uses the specified services in relation to the authorised .....

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he authorised operations in the Special Economic Zone has been taken under the CENVAT Credit Rules, 2004; (f) exemption or refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone shall not be claimed except under this notification. 2. The exemption contained in this notification shall be subject to the following conditions, namely:- (a) the person liable to pay service tax under sub-section (1) or sub-section (2) of section .....

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, then in such cases exemption for the specified services shall be claimed by that person; (b) the developer or units of Special Economic Zone shall claim the exemption by filing a claim for refund of service tax paid on specified services; (c) the developer or units of Special Economic Zone shall file the claim for refund to the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be; (d) the claim for refund shall be filed, withi .....

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ice providers to be relieved of the responsibility to collect and deposit the tax was incorporated by amending notification No. 15/2009-ST dated 20 th May 2009. In the said notification, (i.e. Notification No. 9/2002-ST). A) in paragraph 1, in the proviso,- the sub-paragraph (c), the following shall be substituted, namely:- "(c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in re .....

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have any enabling procedure other than notification no 4/2004-ST dated 31 st March 2004. Rejection of the claim was effected in December 2008 when the same notification prevailed. The original authority was of the view that Initial Public Offering did not comply with the requirement of the notification that services on which exemption was sought had to be consumed within the Zone as the invoices was raised on the corporate office of the appellant at Mumbai. Justifying the rejection, the original .....

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tion 4/2004-ST dated 31 st March 2004 and that the service had been rendered in connection with the authorized operations. Commissioner (Appeals) upheld the order of the original authority with the finding that the applied notification was well within the exemption envisaged by the Special Economic Zones Act, 2005 requiring consumption within the Zone and that the nature of the service precluded compliance with the condition of consumption within the Zone. While acknowledging the charges made by .....

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ority, though acquainted with those existence, held to be inapplicable for reason that (a) the exemption is available only to service tax paid after the notification has come into force (paragraph 3 of notification 9/2009-ST dated 3 rd March 2009) and (b) that the applicant had not sought refund within six months of payment of tax (condition (f) in paragraph 2 of notification 9/2009-ST dated 3 rd March 2009) the objective of such an unambiguous procedure is amply clear. 3.9 Admittedly, the notif .....

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.10 The two notifications, in conjunction, have given effect to the statutory promise by devising two methods for availing the exemption - by upfront exemption when the service is rendered within the geographical boundaries of the Special Economic Zone and by the refund route where the physical performance of service is not within the boundaries but is intended for the authorized operation of the developer or unit. A pre-approval and verification system was also established in the same notificat .....

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at exemption procedure having been notified well before the enactment of the Special Economic Zones Act, 2005 and with intent to provide the benefit within the limited scope of a scheme that had its authority, not from a statute, but from the Foreign Trade Policy, cannot be claimed to be in consonance with the Special Economic Zones Act, 2005. Given the reasons for rejection of the claim by the original authority and for endorsement by the first appellate authority, viz., the less than adequate .....

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ons that are statutorily embodied. There did not appear to be any ambiguity in extending the exemption to goods - imported or indigenous - because tangibility of goods made it possible to control its movement from source to consumption. Services, owing to its intangibility, was not so amenable and service providers, without the assurance of having interpreted the exemption in the proper manner, would not like to take the risk of being held liable for recovery of such tax along with interest and .....

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onformity with the scheme envisaged by the Special Economic Zones Act, 2005. The approval of the Approval Committee is not in question in the instant case. However, the original authority could not find a link between the service rendered by M/s NSDL and the operations of the appellant as developer/unit in the Zone. The two lower authorities have erred in arriving at this conclusion. The undertaking in the Zone was the sole investment of the appellant and hence any service provided to the appell .....

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NSDL and which, undoubtedly, would have confronted M/s NSDL had they chosen the route adopted by M/s Norasia to render the service without including tax in the consideration. Hence, it would be appropriate to recall the findings of the Tribunal in that case: "4. We have considered the submissions from both the sides. The notification No.4/2004 uses expression "for consumption of services" within such "Special Economic Zone", but at the same time also uses the expression .....

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d) xxxx (e) Exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) xxxx (g) xxxx" 5. It is clear from the above provision that there is no restriction regarding the consumption of the services and the exemption is extended to the services rendered to a unit in the SEZ for the purpose of authorised operation in the SEZ. 6. Rule 31 of the Special .....

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here is no dispute that the containers provided to the units in the SEZ have been used by such units for the authorised operations, namely, for bringing inputs for manufacture and carrying the finished goods out of SEZ for export purposes. Therefore, we are of the view that the impugned services relating to supply of containers in the SEZ are exempt from payment of service tax. We, accordingly, set aside the impugned order and allow the appeals. The Stay applications also stand disposed of." .....

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ons. Accordingly, in re Tata Consultancy Services, the eligibility for refund, even where the procedure was susceptible to be resorted to for denial of exemption, under section 11B of Central Excise Act, 1944 read with section 83 of Finance Act, 1994 was laid down. Accordingly, we refer to the decision therein: "6.2 Coming to the next question, whether in respect of the services which were wholly consumed and which were fully exempt from payment of duty, whether the appellants can be grante .....

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d in Clause (105) of Section 65 of the Finance Act, 1994 which are provided in relation to the authorized operations in a SEZ and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ, from the whole of the service tax leviable thereon under Section 66 of the Finance Act, 1994. The refund procedure given below for operationalising the exemption applies to services which are procured from outside in respect of which the service tax liabili .....

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is eligible for refund under Section 11B, then the same cannot be denied on the ground that the claim was made under Notification No. 09/2009-ST. In this case, there is no dispute that the services were provided in relation to the authorized operations of the appellant within the SEZ. From the records it is seen that the appellant has filed the refund claim within the time period provided for in Section 11B and the appellant has borne the incidence of taxation. 6.3 Services provided to a SEZ or .....

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ld not bear the burden of taxes. If this policy objective has to be sub-served and the objective realized broader view of the provisions relating to refund has to be taken. Therefore, even if the appellant was not eligible for refund under Notification No. 09/2009-ST dated 3.3.2009, the appellants were certainly eligible for refund under Section 11B of the Central Excise Act, 1944. In this view of the matter, rejection of service tax refund is not sustainable in law." 3.16 In re IntrasPharm .....

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elling that neither Notification 9/2009 nor 15/2009 disentitle immunity to service tax enjoined by the provisions of the 2005 Act. It therefore appears that Notification Nos. 9/2009 and 15/2009 merely contour the process by which the benefit of exemption/immunity to tax is operationalised. Notification Nos. 9/2009 and 15/2009 have provided a facilitative regime whereby a developer or units of SEZ, as recipients of taxable service are enabled the facility of claiming refund of service tax, remitt .....

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erever assessed and collected by Revenue or remitted otherwise by the taxable service provider, inadvertently. Considered in the light of this analysis, the substituted provisions, of clause/sub-paragraph 'C' of Notification No. 15/2009 cannot be inferred to have imposed any disability on the recipient of services consumed wholly within the SEZ, from seeking refund of service tax remitted on such transactions, by the providers of such services." 3.17 This was followed by the Tribuna .....

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ction of Notifications 9/2009 and 15/2009 issued under section 93(1) of the Act, considered in the light of overarching provisions of Section 7 and 26 (e) of the 2005 Act, the conclusion appears compelling that neither Notification 9/2009 nor 15/2009 disentitle immunity to service tax enjoined by the provisions of the 2005 Act. It therefore appears that Notification Nos. 9/2009 and 15/2009 merely contour the process by which the benefit of exemption/immunity to tax is operationalized. Notificati .....

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or 15/2009. These notifications are calibrated to enable recipients of taxable services (exempt from liability to tax under the provisions of the 2005 Act), to claim refund of the service] tax, wherever assessed and, collected by Revenue or remitted otherwise by the taxable service provider, inadvertently. Considered in the light of this analysis, the substituted provisions, of clause/sub-paragraph 'C' of Notification No.15/2009 cannot be inferred to have imposed any disability on the r .....

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The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." 7. From the provisions contained in Section 26 (1)(e) of the SEZ Act, read with Rule 30 (10) of the SEZ Rules, 2006, it can be seen that no service tax is payable on the services provided by a service provider to a SEZ unit. Further, Sec. 51 of the SEZ Act also makes .....

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